Bond yields have been sent higher after investors took comments by the Bank of England’s governor to mean that an interest rate rise would come next month.
Andrew Bailey said that inflation would rise further and remain high for longer than first expected.
His comments caused short-dated government bond yields to climb to their highest level in two and a half years.
The yield on two-year bonds rose by 14 basis points to 0.71% in early trading yesterday and the yield on five-year gilts also jumped.
Investors now think it is more likely than not that policymakers will raise the bank rate by 15 basis points to 0.25% when they next meet on 4 November and expect rates to reach 0.75% by February.
